Chapter 3 Marketing Segmentation. ©2000 Prentice Hall What is Marketing Segmentation? Who uses market segmentation? How does market segmentation operate?

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  • Chapter 3 Marketing Segmentation

    2000 Prentice Hall

    What is Marketing Segmentation?Who uses market segmentation?How does market segmentation operate?

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    Market SegmentationThe process of dividing a potential market into distinct subsets of consumers and selecting one or more segments as a target market to be reached with a distinct marketing mix.

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    Mass MarketingOffering the same product and marketing mix to all consumers.

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    PositioningEstablishing a specific image for a brand in relation to competing brands.

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    Who Uses Market Segmentation?Marketers of consumer goodsRetailersHotelsIndustrial Manufacturers

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    RepositioningChanging the way a product is perceived by consumers in relation to other brands or product uses.

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    Bases for SegmentationGeographic SegmentationDemographic SegmentationPsychological SegmentationPsychographic SegmentationSociocultural SegmentationUse-Related SegmentationUsage-Situation SegmentationBenefit SegmentationHybrid Segmentation Approaches

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    Table 3.1 Market Segmentation Categories and Selected VariablesSEGMENTATION BASESELECTED SEGMENTATION VARIABLESGeographic SegmentationClimateDensity of areaCity SizeRegionSouthwest, Mountain States, Alaska, HawaiiMajor metropolitan areas, small cities, townsUrban, suburban, exurban, ruralTemperate, hot, humid, rainyDemographic SegmentationIncomeMarital statusSexAgeUnder 11, 12-17, 18-34, 35-49, 50-64, 65-74, 75-99, 100+Male, femaleSingle, married, divorced, living together, widowedUnder $25,000, $25,000-$34,999, $35,000-$49,999, $50,000-$74,999, $75,000-$99,000, $100,000 and overOccupationEducationSome high school, high school graduate, some college, college graduate, postgraduateProfessional, blue-collar, white-collar, agricultural, military

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    Table 3.1 continuedSEGMENTATION BASESELECTED SEGMENTATION VARIABLESPsychological SegmentationLearning-involvementPerceptionPersonalityNeeds-motivationShelter, safety, security, affection, sense of self-worthExtroverts, novelty seeker, aggressives, low dogmaticsLow-risk, moderate-risk, high-riskLow-involvement, high-involvementPsychographicSubcultures (Race/ethnic)ReligionCultures(Lifestyle) SegmentationEconomy-minded, couch potatoes outdoors enthusiasts status seekersAmerican, Italian, Chinese, Mexican, French, PakistaniCatholic, Protestant, Jewish, Moslem, otherAfrican-American, Caucasian, Asian, HispanicFamily life cycleSocial classLower, middle, upperBachelors, young married, full nesters, empty nestersAttitudesPositive attitude, negative attitudeSociocultural Segmentation

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    Table 3.1 continuedSEGMENTATION BASESELECTED SEGMENTATION VARIABLESUse-Related SegmentationBrand loyaltyAwareness statusUsage rateHeavy users, medium users, light users, non usersUnaware, aware interested, enthusiasticNone, some, strongUse-Situation SegmentationLocationObjectiveTimeLeisure, work, rush, morning, nightPersonal, gift, snack, fun, achievementHome, work, friends home, in-storePersonSelf, family members, friends, boss, peerBenefit SegmentationConvenience, social acceptance, long lasting, economy,value-for-the-money

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    Table 3.1 continuedSEGMENTATION BASESELECTED SEGMENTATION VARIABLESGeodemographicsMoney and Brains, Black Enterprise, Old Yankee Rows, Downtown Dixie-StyleDemographic/psychographicCombination of demographic and psychographic profiles of consumer segments profilesSRI VALSTMActualizer, fulfilled, believer, achiever, striver, experiencer, maker, strugglerHybrid SegmentationVALSTM is an example of a demographic/psychographic profile. PRIZM is an example of a geodemographic profile.

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    Geographic SegmentationThe division of a total potential market into smaller subgroups on the basis on geographic variables (e.g., region, state, or city).

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    Micro-marketingHighly regionalized marketing strategies that use advertising and promotional campaigns specifically geared to local market needs and conditions.

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    Demographic SegmentationAgeSexMarital StatusIncome, Education, and Occupation

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    AgeAge effectsoccurrences due to chronological ageCohort effectsoccurrences due to growing up during a specific time period

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    SexTraditional roles of men and women in purchasesChanging sex rolesDual-income householdsWorking women less accessible through traditional media

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    Marital StatusHouseholds as a consuming unitSinglesdivorcedsingle parentsdual-income married

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    Income, Education, and OccupationIncome often combined with other variables for segmentationThe three variables tend to be correlated

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    Psychological SegmentationMotivationsPersonalityPerceptionsLearningAttitudes

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    AIOsPsychographic variables that focus on activities, interests, and opinions. Also referred to as Lifestyle.

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    Table 3.2 A Portion of an AIO Inventory Used to Identify Techno-Road-WarriorsInstructions: Please read each statement and place an x in the box that best indicates how strongly you agree or disagree with the statement.

    I feel that my life is moving faster and faster, sometimes just too fast.

    If I could consider the pluses and minuses, technology has been good for me.

    I find that I have to pull myself away from e-mail.

    Given my lifestyle, I have more of a shortage of time than money.

    I like the benefits of the Internet, but I often dont have the time to take advantage of them.

    I am generally open to considering new practices and new technology.[1][2][3][4][5][6][7][1][2][3][4][5][6][7][1][2][3][4][5][6][7][1][2][3][4][5][6][7][1][2][3][4][5][6][7][1][2][3][4][5][6][7]Agree CompletelyDisagree Completely

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    Table 3.3 A Hypothetical Psychographic Profile of the Techno-Road-WarriorGoes on the Internet 6-plus times a weekSends and/or receives 15 or more e-mail messages a weekRegularly visits Web sites to gather information and/or to comparison shopOften buys personal items via 800 numbers and/or over the InternetMay trade stocks and/or make travel reservations over the InternetEarns $100,000 or more a yearBelongs to several rewards programs (for example, frequent flyer programs, hotel programs, rent-a-car programs)

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    Sociocultural SegmentationFamily Life CycleSocial ClassCulture, Subculture, and Cross-Culture

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    Family Life CyclePhases a family goes through in their formation, growth, and final dissolutionBachelorhoodHoneymoonersParenthoodPost-parenthoodDissolution

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    Culture, Subculture, an Cross-CultureSegmenting on the basis of cultural heritageassumes members of the same culture share the same values, beliefs, and customsSubcultures are united by certain experiences, values, or beliefs.e.g., Hispanic subculture, African American subculture, etc.

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    Use-Related SegmentationRate of UsageHeavy vs. LightAwareness StatusAware vs. UnawareBrand LoyaltyBrand Loyal vs. Brand Switchers

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    Usage-Situation SegmentationSegmenting on the basis of special occasions or situations

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    Benefit SegmentationSegmenting on the basis of the most important benefit sought by consumers when purchasing the product or serviceToothpaste can be bought forGood Taste (e.g., Colgate)Fresh Breath (e.g, Close Up)White Teeth (e.g, Rembrandt)Cavity Protection (e.g., Crest)

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    Hybrid Segmentation ApproachesPsychographic-Demographic ProfilesGeodemographic SegmentationSRI Consultings Values and Lifestyle System (VALSTM)

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    Table 3.4 Selected Psychographic/Demographic Characteristics of the PC Magazine SubscriberDEMOGRAPHICSPercentSEX (BASE 990)Men86Women13PSYCHOGRAPHICSPercentUSE A COMPUTER100At home96At work89On vacation/traveling46AGEUnder 25 525 - 341835 - 442945 - 543155 - 641265 or older 5Mean age44.1SELECTED USE OF COMPUTERWord Processing96Connect to Internet86E-mail84For work80Accounting/record keeping75Reference68Recreation/games66

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    Table 3.4 continuedDEMOGRAPHICSPercentPSYCHOGRAPHICSPercentEDUCATIONSome college or less27Graduate college27Education beyond college graduate46EMPLOYMENT STATUSEmployed by someone else68Self-employed21Other11PORTABLE DEVICES USES WHEN TRAVELING ON BUSINESSLaptop/notebook computer57Cellular phone47Beeper or pager30Personal Digital Assistant/ electronic organizer14

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    Table 3.4 continuedDEMOGRAPHICSPercentPSYCHOGRAPHICSPercentOCCUPATION/BUSINESS DEPT.Computer related- professional22Senior or corporate management16Engineering-related professional13Administrative/ manufacturing, accounting, finance, purchasing, advertising, marketing, sales26Others23TRAVEL FOR BUSINESS/PLEASUREBusiness Travel5 or more days per month315 or more nights away from home per month17Pleasure/Vacation Travel15 or more days per year37Mean number of days per year15.5MEMBER OF FREQUENT FLYER PROGRAMS90

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    Table 3.4 continuedDEMOGRAPHICSPercentPSYCHOGRAPHICSPercentINCOMEUnder $30,0007$30,000 - $49,99915$50,000 - $74,99924$75,000 - $99,99919$100,000 or more24Mean income$87,700PRIMARY RESIDENCEOwn74Rent18Other3No answer5FINANCIAL SERVICESCurrently ownMutual funds48Stocks44Bonds24Life insurance/annuities44Currently useBrokerage services36On-line investment services16Retirement/financial planning41

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    Table 3.4 continuedRESPONSE OF SELECTED CONSUMER PSYCHOGRAPHIC STATEMENTSPercentResearch before choose brand of new product to buy41Other people ask my opinion about which computer products to buy41Usually buy products based on quality, not price26Prefer products that are latest in new technology26Among group I am one of first to try new product19Walking/running/jogging63Exercise/fitness/weight training44Bicycling7Swimming37Golf27Fishing23Boating/sailing19Skiing19Tennis14SELECTED SPORTS/ACTIVITES PLAYED/PARTICIPATED IN PAST YEARPercent

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    Table 3.4 continuedListen to music77Reading61Going to movies60Surfing the Internet50Games-videos on computer48Gardening32Going to the theater32Cooking30Photography30Collecting stamps/coins11Sewing needlecraft6HOBBIES/OTHER ACTIVITIES PARTICIPATED INPercentSource: 1997 Lifestyles Study, PC Magazine Subscriber Study, Ziff-Davis, Inc., June 1997.

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    Table 3.5 Sample Geodemographic ClustersBLUE BLOOD ESTATES0.8% of United States householdsPredominant employment: ProfessionalElite super-rich familiesKey education level: College gradsAdult age range: 35-44, 45-54, 55-64

    Characteristics: Americas wealthiest suburbs are populated by established executives, professional, and heirs to old money. These people are accustomed to privilege and live in luxury, often surrounded by servants. A tenth of this group are multimillionaires. The next level of affluence is a sharp drop from this pinnacle. Blue blood estate people belong to a country club, own mutual funds ($10,000+), purchase a car phone, watch TV golf, and read business magazines.

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    Table 3.5 continuedMID-CITY MIX1.3% of United States householdsPredominant employment: Service, white-collarAfrican American Singles and familiesKey educational level: High school, some collegeAdult age range: 35-54

    Characteristics: These individuals and families are geographically centered in the Northeast and Great Lakes regions. They are above average ethnic diversity and a mix of white- and blue-collar employment. These rowhouse neighborhoods on the urban fringe are two-thirds black and have a high incidence of college enrollment. They go to pro basketball games, have veterans life insurance, eat canned hashes, listen to religious/gospel music, and read fashion/sports magazines.

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    Table 3.5 continuedGRAY COLLARS2.1% of United States householdsAdult age range: 55-64, 65+Median household income: $31,400Aging couples in inner suburbs

    Characteristics: For nearly two decades, we read about the decline of the Great Lakes industrial Rust Belt, Decimated by foreign takeovers in the steel and automobile industries, the area lost a million jobs. Although most of the kids left, their highly skilled parents stayed and are now benefiting from a major U.S. industrial resurgence. They buy 1950s nostalgia, own CDs, eat canned cooked hams, listen to radio football, and read health/fitness magazines.

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    Table 3.5 continuedYOUNG INFLUENTIALS1.1% of United States householdsPredominant employment: Professional, white-collarUpwardly mobile singles and couplesKey education level: College gradsAdult age range: 24, 25-34

    Characteristics: This cluster is dubbed the Young Urban Professional. Before getting married they were the educated, high-tech, metropolitan sophisticates, the swingers and childless live-in couples, whose double incomes bought the good life in Boomtown U.S.A. They are the last of the Yuppies. They go to college basketball games, have an American Express card, often drink imported beer, listen to progressive rock radio, and read style/fashion magazines.

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    Table 3.5 continuedSHOTGUNS AND PICKUPS1.6% of United States householdsPredominant employment: Blue-collar, farmRural blue-collar workers and familiesKey education level: High school grade schoolAdult age range: 35-44, 45-54

    Characteristics: The least affluent of the Country Families clusters, members of this group are found in the Northeast, the Southeast, in the Great Lakes and Piedmont industrial regions. They lead the Country Families group in blue-collar jobs; the majority are married with school-age children. They are church-goers who also enjoy bowling, hunting, sewing, and attending auto races, smoke pipe tobacco, have medical loss of income insurance, drink Canadian whisky, listen to country radio, and read hunting/car & truck magazines.Source: Courtesy of Claritas Inc. (PRIZM and 62 Cluster nicknames are registered trademarks of Claritas Inc.). Reprinted by permission.

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    Figure 3-10:SRI Consultings Values and Lifestyle System (VALSTM)ACTUALIZERSSTRUGGLERSFULFILLEDSBELIEVERSACHIEVERSEXPERIENCERSSTRIVERSMAKERSLow ResourcesHigh ResourcesAction OrientedStatus OrientedPrinciple Oriented

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    Figure 3.11 VALSTM 2 Segments and Participation in Selected Sports

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    Table 3.6 The Size of Each VALSTM Segment as Percent of the United States PopulationVALSTM SEGMENTPERCENT OF POPULATIONActualizer10.511.7%StrugglerMakerExperiencerStriverAchieverBelieverFulfilled9.512.012.911.814.717.0

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    Criteria For Effective Targeting of Market SegmentsIdentificationSufficiencyStabilityAccessibility

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    Implementing Segmentation StrategiesConcentrated Versus Differentiated MarketingCountersegmentation

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    Counterseg-mentation StrategyA strategy in which a company combines two or more segments into a single segment to be targeted with an individually tailored product or promotion campaign.

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